Hyperinflation

One hears much discussion of hyperinflation on the gold web sites. It is a worst case scenario and used to alarm and excite. It is used to designate a period when prices are rising very rapidly, the favorite example being Germany of 1914-23, and during this time prices rose by very close to one trillion times. That is, a piece of bread which started off costing 1 mark ended costing one trillion marks. So it is not merely in todayâ€™s world that we are using numbers above 1 trillion. But it is an instructive period of history, and we must always keep in mind that those who do not learn from history are doomed to repeat it.

The last part of â€œhyperinflationâ€ is â€œinflation,â€ and this is perhaps the most important part (because it receives the least comment). If we examine the word â€œinflationâ€ as it is used outside of economics, then it always means a going up. For example, one inflates a balloon or an inner tube. Always it refers to something which gets bigger.

This was not always the case. If we study the price rises which occurred between the American Revolution and the Civil War (the rise in prices associated with the continental during the Revolutionary War, the price increase of the War of 1812 and the price increases in both North and South during the Civil War itself) they are never called inflations. They are always called depreciations. And depreciation has the exact opposite meaning from inflation. It means a going down or a getting smaller

Well, what is going on? Is something getting bigger, or is something getting smaller? Well, any writer who comments on the price increase of the American Revolution will call it a depreciation, i.e., a getting smaller, because the continental lost 99% of its value between 1776 and 1780. This was universally regarded as a going down of the continental, not as a going up of goods, because prices remained the same both in terms of the English gold currency and in terms of the Spanish silver currency.

The situation was the same during the War of 1812. The legal U.S. currency at the time was the gold or silver dollar. This did not depreciate, and prices did not rise in its terms (example, New England). Prices only rose in terms of paper bank â€œnotesâ€ which circulated as (unofficial) money in the central and southern states, and this is universally recognized as a depreciation of these â€œnotes.â€ A similar situation existed during the Civil War because, although prices rose through most of the North, California remained on the gold/silver standard and had price stability. This was not an inflation. It was a depreciation of the greenback.

After the Civil War, there was a big debate about the legality of the paper greenback. The dispute went to the Supreme Court, which ruled in 1870 that the greenback was not legal money and that only gold and silver coin were a legal tender in the United States (Hepburn decision). However, the paper money forces were trying to prevent a return to gold/silver money; they did not give up but threw themselves into the battle more intensely. The Hepburn decision was by a vote of 5-3. This shows just how out of step the paper money forces were. Because of the secession of the South, 4 judges had retired from the (8 man) Supreme Court, and this gave Lincoln 4 appointees. One would have thought that these were 4 solid votes for Lincolnâ€™s greenbacks, and indeed he appointed what he thought were 4 safe votes. First, the 4 old justices, who had been appointed with no attention to their views on this issue, went solid for gold/silver money. And second, Chief Justice Samuel Chase (after whom Chase Bank was later named) deserted the Republicans. When Chase studied the issue, he could not, in conscience, vote for the legality of paper money in America. So he joined the Democrats even though he had been Secretary of the Treasury under Lincoln and had issued the greenbacks and ruled his own action (in so issuing) illegal. (Ah, yes, in the old days people put country above party.)

The Republicans, believing that paper money was popular and influenced by the fact that Lincoln had been raised to hero status by his assassination, created a 9 th position on the Court. A Democrat retired from old age, and this gave President Grant two appointments to the Court. He used them to appoint two known paper money advocates. These tilted the balance, and the new Court voted in favor of paper money 5-4 (Legal Tender decision, 1871).

So when a judge or a legal â€œscholarâ€ tells you that the courts are bound by precedent, you know that he is a liar and a fraud. In 1871, the Supreme Court looked precedent right in the face and spit on it. The Constitution was explicitly written to ban paper money. Even the advocates for paper money at the Constitutional Convention of 1787 openly stated that, if the proposed constitution passed into law, then paper money would be permanently banned in America. (â€œThe convention was so smitten with the paper money dread that they insisted that the prohibition be absolute.â€ See the debate at the Constitutional Convention, Aug. 16, 1787 in which an opening wedge for paper money was voted down by 9 states to 2.)

After their victory in the Court the paper money faction moved aggressively and proposed that resumption (of gold/silver) be postponed. Congress approved this measure in 1874. President Grant was going to sign this into law, but upon reading it over for the last time before signing it, he changed his mind and vetoed the postponement measure instead. (Yes, in the old days politicians actually read bills before voting on them.)

Then Congress returned home for the 1874 election and got the shock of their lives. The country was soundly pro-gold. The Republicans did a 180Âº reversal and became the pro-gold party, which led to their dominance for the next 6 decades, in particular the election of 1896. During this time America became the most powerful economy in the history of the world.

But also during this time the basic language changed to call a general rise in prices an inflation instead of a depreciation. This was a major victory for the paper money forces because it allowed the argument that goods were going up (instead of the currency going down) to be accepted by the naÃ¯ve. If goods were going up, then the fault must be with goods. Therefore, letâ€™s make a law against a rise in goods (as the Emperor Diocletian did in the early 4 th century). This led to the collapse of the Roman economy and in turn the collapse of the Roman Empire.

In your next economic discussion, try the experiment of using the correct concept and calling a rise in prices a depreciation of the currency instead of an inflation of goods. Wham, things will turn around so rapidly that you head will spin. All of a sudden the other fellow will see your point and admit that the increase in money is crucial.

Take the recent debate which has been going on in the internet sites since 2008 as to whether the country is going to have â€œdeflationâ€ or â€œinflation.â€ You have been following this debate and know that there is a substantial opinion predicting â€œdeflation.â€ Here at the One-handed Economist we know that this is like a debate between the math professor and the idiot from off the street who argues that 2 + 2 = 5. The â€œdeflationistasâ€ are going to lose, and the subscribers to the One-handed Economist are going to take their money.

How do we know this? Because they have been losing since the Civil War. They have not only been losing in the United States. They have been losing in every country in the world. Fortunately for us these people have short attention spans. We beat them. We take their money. Then they forget. Then we beat them again, etc. Some people never learn.

The astute commodity speculator can see the signs. Just this week the Nov. CRB index went to a new relative high (above 500). Wheat broke out of a triple bottom. Cocoa and coffee are rivaling gold in their quest for new highs. The large depreciation of the currency which I predicted after seeing the massive creation of money by the Fed in 2008-09 may be ready to start here and now. It will start in commodities. Then it will move to the Producer Price Index. And then it will move into the Consumer Price Index. Then the newspapers will acknowledge it, and only then will the â€œdeflationistasâ€ get scared and rush to buy gold. This is what they did in 1979. Those who do not learn from history are doomed to repeat it.

So you see there is justice in the world. Through the One-handed Economist you get rich via my advice. I get rich, both by taking my own advice and by selling it to you. And the bad people of the world lose their money to us. There is a harmony in the world if you can see reality as it is and know how to take advantage of it.

I usually shy away from predicting â€œhyperinflation,â€ partly because inflation is the wrong concept (as above) but also because an extreme depreciation of the currency is very rare. The favorite example is 1923 Germany. The worst case is Hungry, 1946. But we have a second worst case recently in the country of Zimbabwe over the past decade. It is a shocker.

year

rate of increase in prices

1999

56.9%

2000

55.22%

2001

112.1%

2002

198.93%

2003

598.75%

2004

132.75%

2005

585.84%

2006

1,281%

2007

66,212.3%

2008

231,150,888.87% (July)

In January 2009, the Zimbabwe dollar ceased to circulate, and the current monies used in Zimbabwe are the U.S. dollar and the South African rand. The Zimbabwe dollar came into existence in 1980 at a value of $1.59 (U.S. dollar). Official statistics for July 2008 put â€œinflationâ€ at 231 million percent. In November 2008, Professor Steve Hanke estimated Zimbabwe prices were rising at 89.7 sextillion percent annually. (A sextillion here in the U.S. is 1,000,000,000,000,000,000,000.) The official rate of unemployment is 95%.)

Von Mises pointed out that, once a money expansion starts, it tends to accelerate to the upside. This is because the paper aristocracy is in control, and they need to crank the printing presses faster and faster to maintain their profits. We saw the same thing in the U.S. in 2008 as Goldman Sachs declared a crisis and got the Fed to massively increase the quantity of money.

Over the past decade, expected life-span in Zimbabwe fell from about 60 years to about 40 years. It is impossible to conceive of such a thing without a corresponding reduction in population, say from 12 million to 8 million. Such a reduction may have already occurred, but the official Zimbabwe statistics do not admit it.

If virtually no one in the country is employed, then Zimbabwe has returned to the Stone Age, and people are getting their food by hunting and gathering. A recent law forbade Zimbabweans from withdrawing from their own bank account an amount of money greater than 25Â¢ (in U.S. dollars) per day. The decisive event which brought an end to the depreciation occurred when doctors and nurses walked out of the hospitals due to absurdly low real pay, and the country was hit by a cholera epidemic. It would not at all surprise me if 4 million Zimbabweans have died. Meanwhile, Gideon Gono, the head of the Zimbabwe Central Bank and the man printing the money, drives a 12 cylinder Mercedes Benz and lives in a 47 bedroom palace down the street from dictator Robert Mugabe. His home has a swimming pool, landscaped gardens and a gym bigger than many houses.

The important thing to understand is that the theory behind the Zimbabwean depreciation is exactly the same as the theory behind our depreciation here in America. If Zimbabwe â€œstimulatesâ€ its economy and 4 million people die and the rest are driven back to the Stone Age, then how can the exact same policies lead to anything but the same result in America?

To show people how true knowledge of economics can help them make money in these terrible times, I publish a fortnightly (every two weeks) economic letter (which has been bullish on gold since 2002). This is the One-handed Economist ($300 per year). You may subscribe by going to my website and pressing the Pay Pal button, or you may subscribe by mailing $290 ($10 cash discount) to: The One-handed Economist, 614 Nashua St. #122, Milford, N.H. 03055. The regular issues are dated every other Friday and are posted on the site (password protected) on Sat/Sun. The most recent regular issue is 8-6-10, and the most recent special bulletin is 7-29-10.

Oh, gold was hit in late July
Al Abelsonâ€™s the reason why.
Please listen close; I ring my bell
To tell you theyâ€™re the last to sell.

Thank you for your interest.

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There are a lot of unemployed American Workers who are concerned about holding on to what they got left. They do not have the money to take advantage of potential investment opportunities. If hyperinflation occurs, everyone will eventually be concerned about where there next meal is coming from. The country has never been $ 13 Trillion in debt ( not counting unfunded liabilities like Social Security, Medicare, military & government pension funds,,,), which makes hyperinflation just as plausible as any other SHTF scenario.
Anyone drawing a taxpayer funded check every month would be well advised to sock some preps away for when those checks become worthless.And forget about hoarding cash. The ability to grow food and raise livestock will be essential in a hyperinflation environment. The population in this country will drop dramatically when food and medicine become too expensive to buy.Â Gear up folks

but of all these, the one that got me most charged up about getting ready for what is coming is the web bot reports available at http://www.halfpasthuman.com – difficult reading for most people but well worth it and only $10 (so cheap for a 35-60 page report full of really scary sh*t that’s happening all around us – read the #4 report before the oil volcano and you will never miss another).

I have no affiliation with any of these sites except that I am a reader of them or buyer of the reports.

also for information about how things have gone in Argentina go to http://www.ferfal.blogspot.com and read his “thoughts on urban survival” essay from several years back. Â That one REALLY opened my eyes, too.

Reading the trends journal and watching Gerald Celente on youtube is also really good for waking a person up. Â I keep meaning to buy his book but have not yet. Â I just ordered “Not By Fire But By Ice” go to http://www.iceagenow.com for the opposite problem we will be facing (for sure, tell me an ice age is not coming and I will laugh in your face, big dumb @ss) and the magnetic reversals book, too.

Try to wake up as many people as possible before it’s too late to prep

good luck everyone it’s going to be a rough ride for most of us, less so for preppers, but we have to see all the people who didn’t do anything to get ready suffer way more, and that is going to really suck.

Hopefully the criminalsÂ that populate federal government offices in D.C. will see a drastic dropÂ in numbers as well.Â I’m guessingÂ the revolution will see to that.Â Free entertainment for the masses.Â Â Â Â

I have a simple question if somebody could answer it.
If say the USD inflates to say for funny figures to a 1000 to 1, how fast could you pay off your house with a mortgage of $300K?
Can you see where I am going with this line of thought? Is inflation a common mans problem or is it the banks problem?
You have a mortgage that doesnâ€™t have an instrument to adjust for inflation; we and the banks have a locked rate at a set price no matter what the money is worth, right?
The mortgage contract is set and tied to and in USDs.
Theory; the money inflates to 1000 to 1. I walk into my lender with $300, 000 inflated USD dollars and what pay them off?
I ask again, just whose problem is this?
Us or them?

That assumes you will have some means of raising 300k to do this bank payoff.Â IF still employed, you will be thrown into a tax bracket that eats much of your new found “wealth” ( exactly as folks have found with creeping inflation over the years ).

If unemployed, you will more worried about how you will raise funds to eat when bread is 20 bucks/loaf.

To Hammerrun.. You have a good point..hyperinflation is normally good for those in debt, and bad for lenders..Â In fact, the smartest people (or luckiest) get themselves impossibly deeply in debt just before it really cranks up, then they pay back the loans as slowly as possible..of course you buy real things with your borrowed money such as land or beans and bullets or silver or gold..perhaps a car..stuff you need, or that you can trade..(alcohol or tobacco are good to trade) then you pay back the banksters with the worthless paper (depriciated dollars) and end up getting your stuff at a giant discount of pennies on the dollar. However, there are pitfalls in this.. First, the paper money crowd understand this too and they may create a law something like this..(turn in 1000 green dollars and get 1 red one, then all contracts are repriced to the new red dollar) in that case you could get screwed since the red dollars will be more expensive..that is commonly done by government/banksÂ during hyperinflations, so your timing is critical..pay off your bank at the last moment with cheap green dollars just before they reset the values. The second pitfall here is that salaries will not keep pace with the fall of the dollar. (especially for pensioners and those who work on annual job contracts).Â Those that get the dollars first (banks and the rich) get the biggest benefitÂ from them since they loose value with time. In a trickle down economy like ours, theÂ common people (called “consumers” which means “worthless eaters”Â by the media and government) get the dollars last so they get theÂ least boom for the buck so to speak.Â Â Even if your boss is kind and increases your salary by 100% a day, if the inflation rate is 120% a day, by the end of the week you are working for half wages..Â
Your best strategy is to become a buddy with somebody who has lived through a hyperinflation. Â They know strategies to survive and thrive in such an environment that are not in the books and do not appear to be logical or make sense..(but in a mad world, being a little crazy will help you).. As for your house, there is a catch here too..taxes.. If hyperinflation kicks in, lets say your $50,000 house suddenly is worth $50 million..great, but can you pay the taxes on this?Â What happens to your income tax capital gain on this giant windfall if you sell this house at a profit? You loose a bundle of course, since the government will be heavily taxing you..Can you pay the electric bill if it is suddenly $100,000 a month or can you pay to fix that broken window if the guy at the glass company will not come out for less than $10,000?Â One method that will save you willÂ be to buy spare parts for your house NOW..some extra window glass, a couple faucets, a little window AC just in case the big one breaks, a dorm refrigerator as a backup..perhaps a small portable heater, some nails and a little lumber, perhaps some shingles..heck how about get an old toaster at the goodwill for a buck..just in case your old one dies and you cannot afford a new one..preparation is easy and does not have to be expensive.. Â LookÂ more carefully at what you throw away too..lots of things can be used for spare parts or can be fixed.. In Argentina, one of the richest men I knew had a tiny appliance repair business. he had been kind of a joke for years called the junkman..Â he had kept lots ofÂ piles of spare parts and a yard full of old appliances he had been paid to haul away over the years..WhenÂ people could not payÂ for a new appliance anymore, they called him andÂ he could normally fix your old oneÂ or at least patch it together again..If not, he could rebuild one of the old ones in his yard for you..When the hyperinflation came, he became the only appliance store in town for most people.. he became very popular with those who had looked down their noses at the little junkman for years when they could not afford toÂ replace the brokenÂ furnace in their mansion.. the little junkman learned quickly not to worry about if people had money to pay him..he preferred to trade since he did not want the depriciating money anyway..Â a one hour repair job..no problem..Â how about that nice lamp or neckless or that old rooster in back as trade? Or he would trade services..I fix your refrigerator, you tune up my truck next week..he always had a way where he profited and you got a good deal too.. He called it fishing in dark waters..he ended up with mountains of expensive jewelery, antiques, cars, land,Â all traded for his pile of junk and his skills as a handyman..figure out an alternative way to make a living doing something critical, real and tangible..sitting in an office playing with a computer is not going to do it.. you need to learn to feed yourself.

at the risk of oversimplification i will share some of my thoughts about inflation/deflation and also the “price” of gold.

inflation is the expansion of money supply and/or credit which affects anÂ changes Â in monetary velocity (number of hand to hand monetary transactions). please note – an expansion of money supply with a simultaneousÂ decrease in credit may result in no inflationÂ as velocity remains the same. IT IS ABSOLUTELY IMPERATIVE TO REALIZE THAT INFLATION/DEFLATION DEPENDS ON THESE 3 PARAMETERS.

the “price” of goldÂ has nothing to do with inflation. from 1980 until the present we have had extended periods if inflation during which theÂ “price” of gold decreased. THE PRICE OF GOLD IS SOLELYÂ DETERMINED BYÂ SOCIAL STRESS AND/OR MANIPULATION BY MAJOR BANKS. at present major banks are trying to hold the “prices” of gold and silver down by aggressive trading of “paper” gold and silver.

“Prepping”, as it is now known, isn’t something that you just hop into and accomplish in a short period of time. You and the family don’t decide on a Wednesday; “Holly crap, it appears that tough times are ahead; we had better start getting ready!” and then rush out over the weekend and start buying stuff and have everything in place by the next Monday Morning. It just doesn’t work that way.

“Prepping” is a mindset, a way of looking at and thinking about the world around us and our relationship to it coupled with putting supplies and knowledgeÂ aside in preparation for the coming hard times. In short, it doesn’t happen overnight. If you’re just getting started, you have limited time to accomplish much in the way of preparation for you and your family.

1. The govt. says that 9.5% of us are unemployed. As we all know, the govt. lies to us more frequently than it tells us the truth. The real numbers are fast approaching 20%, growing daily and the economy isn’t creating any new jobs.
2. 40+ million Americans are using food stamps in order to put food on the table for their families.
3. The national debt is 14+ TRILLION dollars and growing daily. Our beloved government is still giving billions of dollars away in so-called foreign aid and attempthing to be the world’s biggest bully and benefactor at the same time. This while we have disabled, homeless veterans living under freeway overpasses.
4. By the way Tony, GREAT video. I really likes the scenes of all the tent cities, now known as “Obamavilles”, that are springing up almost overnight around our poor country. This while we the taxpayers are footing the bill for a luxury vacation in Spain for Barkie Obungle’s wife, daughter and assorted hanger-on ‘homies’!
5. Gerald Cellente says that the Christmas of 2012 will be more about putting food on the table than it will be about buying gifts. Except that it may just be the Christmas of 2010 rather than the Christmas of 2012 for many of us.

Soon boys & girls ….. REAL SOON …… coming not just to a neighborhood near you ….. COMING TO YOUR NEIGHBORHOOD!!!!! God Bless and good luck to all. Hope to see you there in bartertown.

We’ve had several years to plan for the days of hyperinflation.Â Most people were too busy gathering trinkets and living high on the hog to think about what’s going on today.Â It caught people unawares and they really have no one to blame but themselves for not preparing.Â We worked our butts off to plan as best as we could. We paid our house off .Â We didn’t buy fancy cars, we made do with the one we had.Â We didn’t go out to restaurants 2 times a day, nor did we buy those expensive lattes at Starbucks.Â What’s coming at us will be far worse than anything we’ve ever experienced.Â We can hold on longer than most people–WTSHTF for reals, woe to any politician/judge/Wall Street types.Â I can’t eat gold.

I AgreeÂ with Â Wheedle & MM. The real question is how much longer can GS and the FR manipulate the markets? Lets face the average American looks at the market and his 401k and thinks I’m Ok.

They don’t realize that once the computer trading starts they will be wiped out before they can pick up the phone. Judging by the flash crash we saw in the spring, I’m not so sure the government could shut it down the markets before it dropped 2000 to 4000 points.

For all the people with 401k’s, IRA’s, SEP’s and any other nest egg I would advise you to know your trading rules. I have pulled back to cash, fixed interestÂ and money markets for now. Though I’m not making 1% I’m as safe as I can be with those type of accounts.

As for paying off your house with hyperinflated dollars that’s wishful thinking. The banksters and the FR will not allow that to happen.

I agree.Â Â I have my Alaska State pension & 401K in cash as well(Stable fund) so it is not attached at all to the market performance when it does fall hard again.Â I’m still making about $20 a day while in thisÂ Stable fund &Â I sleep better at night…Â You are literally gambling with your money in the stock market right now.Â Â

Governments cause the hyper-inflation, because it is the only way for them to end their debt problems.
If USA goes through a hyper-inflation period, Â you will be able to pay off Â all your debts. Â Look Â at Zimbabwe. Â No Zimbabwean owed anything at the end of their hyper-inflation, and all were Trillionaires,Â Â in worthless Zimbabwe money.

At first, people who owe money are the winners and all who have saved in the inflating currency are big losers. Then, everyone are losers, in the fact that the currency isn’t even worth wiping your ass with.
So, yes you will be able to pay off Â all your debts with worthless paper and finding the “money” won’t be the problem. Â Spending it on any thing, other than debt ,will be the challenge. Â It ends with a new currency issued that is tied to a hard asset.(like gold)

After the hyper-inflationary event, unencumbered real estate, hard assets, gold and silver will be the capital needed to restart the system.

Comments…..
Mickey the pirate;
Â I understand where you are going with your example. What I am talking about is in the interim; between the time hyperinflation is identified and the time they say you can have a 1 red for 10 green ones. Or establishing an exchange rate.
Â I had acquaintances in Mexico in the late 80s when the Peso inflated so rapidly. The comment that got me was â€œyou need a wheelbarrow full of pesos just to go to the store and get groceries.â€ And at some point the government established an exchange rate. But right in that crux is what I am talking about. Between the so to say the wheelbarrow and the exchange.
Â Odiously, if you have no tangible assets none that you can inflate the price of you might just be really stuck and at the mercy of what ever comes.
Â My thought; for a silly instance, if you have chickens and eggs. And a chicken you used to get $5 for in the past, all of a sudden you can get $5000 in a barter situation. It wouldnâ€™t take to many chickens to pay off the mortgage. But if I would wait until after the exchange was established, I would be screwed. Â Â
I thought if you have assets at the moment, and take advantage of the moment a common person might /could get on top of this.
Another example; if Gold rises to $5000 or more an oz. if you had 60 ozs. That will pay off the mortgage. Who will get hosed in this? It looks like the banks/lenders.
Â
Â
Â

Ok, I hope ya’ll will go easy on this newcomer as I confess my sins. I only recently took off my rose colored glasses. Looking back, it’s hard to believe that I could be so blind. I am frantically trying to make up for lost time and I agree I am definitely late to the party. The problem is that during my naive and blind days I became severely in debt, and by severly I mean SEVERELY! I adopted several of my foster kids during the last 23 years and one of them had terrible problems and now that she is an adult and there are no programs to help someone without money I have maxxed out several credit cards trying to help her until I am now completely maxxed out. I can’t even make the payments anymore and she still is not helped and now I am in this mess. I know I will get yelled at by how irresponsible I was to get into this mess but I couldn’t stand to see her suffer and still thought I could make her life right and make up for the things that shouldn’t have happened to her in the first place. Sooooo anyway, does anyone know what happens when I can’t make the credit card payments? Do I go to jail,do I get sued? Anyone ever stupid enough to get into this kind of mess before?

Regarding the debt, don’t worry, you will not go to jail if you default on your loans. (only if you write bad checks)

Being sued will depend on your debt and other assets. If a debt collector eventually gets hold of your account and they see you have tons of assets and owe $20,000 then it is may be in their interest to sue.

If, however, you don’t really owe all that much and don’t have assets, they will likely not sue you. Of course, it could go either way. It depends on the individual collection agency.

I have personally gone through credit card defaults in the early 2000’s because of various medical issues that arose… but my real problem was getting into debt in the first place. It’s been well over 4 years since then, and being a Texas resident with specific consumer protections against debt collectors, I can never be sued for this debt because of statute of limitations on the debt. And since I reached the 7 year federal reporting limit on debt reporting, any collection listings that I did have have now been removed from my personal credit report.

There will be certain laws within your own state that can protect you from credit collectors, as well as Federal Laws. But, the fact is, you owe the money, so there is always the possibility that you will get sued (within the statute of limitations in your state). However, if there is nothing you can do about paying off your debt, then there is nothing you can do. I have a friend who just recently defaulted on his Citibank debt after they blanket-raised rates to 29.99%… his payment went from $150 to about $500 a month and he just couldn’t service the debt anymore so he walked away from a $15,000 balance.

Personally, I see no moral or ethical issues with your inability to pay, even if you flat out default. It’s nothing that the very same banks that lent you the money haven’t done… the only difference is that they were directly backed by the Federal Reserve’s printing presses.

If I was at the point where I couldn’t service my personal debt, I would switch my focus from worrying about what I cannot control, to making positive changes in my life in the areas I CAN control.

You WILL get calls from debt collectors (and you can make these go away too by sending a letter and asking them to contact you via postal mail only)… This will at least alleviate the stress of them calling you on a nightly basis…

Again, all you can do is put your focus on the things you can control – otherwise this will simply drive you crazy.

Good Luck.

Mac

p.s. – I am sure there are differing opinions about what you should do, so I’d recommend reading more information on this (hopefully in follow-up responses here) and in forums across the web. This is a fantastic resources for all things credit and debt: Credit Boards

Mac, Thank you for responding. I owe a lot with not much for assets. Just my home which is not paid for yet.Â One of the cards also raised my rate from a ‘fixed’ 3.9 to a 29.99 when I had never been late or anything. I agree, that I need to get control of my life. I am collapsing under the weight of my daughters pain and have to realize that I obviously cannot fix it or it would be fixed cause I have tried with all but my life.Â Do you recommend writing the companies and telling them first or just wait till they call after they no longer receive payments? Thank you so much for your time.

Sorry to hear about your problems. Actually, the farther in debt that you are, the better off that you are.

Bankruptcy is still available for most people in your situation, even under the new rules. The less that you owe, the greater the chance that a bankruptcy judge might order you to participate in some sort of a reorganization plan and a structured/reduced repayment plan. This would most likely eliminate the interest, but you would still have to repay the principal over a period of time.

But, if you owe so much that a reorganization of your debt wouldn’t have a chance in hell of you repaying the debt; the judge will most likely just discharge the whole thing and you walk out debt free.

In most states, if you are paying on a house or car, you can affirm this debt with that particular creditor and discharge the rest. That way you can keep the house or car as long as you keep making the payments.

Most bankruptcy attorneys will give you an initial consultation for free and perhaps even work out a payment plan for you. Have all your information in order when you go in for that initial free consultation; ie. amount of debt, date incurred, to whom you owe the money,accpunt #’s, etc. Get as much information down on paper so that the attorney will be able to make an informed evaluation of your situation. You will need to provide him with this information before he files the documents with the court anyway.

It sounds like your credit is already ‘screwed’. Filing bankruptcy will actually improve it. You can only file once every seven years, so as soon as your bankruptcy becomes final you will start getting those preapproved credit card offers in your mailbox. I would advise against accepting them; but that’s up to you.

Comments…..
Jane, I agreewith madmarkie..bankruptcy seems like it would be a good option for you…however, if you are going to do it, max out the credit cards first..not wildly, but in the next few months, pay for the groceries with them, the gas for the car ect..you cannot keep any assets in a backruptcy such as expensive jewelry or stocks and bonds, or a pile of cash for that matter, so tucking a few dollars under the pillow would be illegal and could cause the court to disallow the bankruptcy should theyever Â find out you were hording or not telling them exactly what you have… But it sounds like you should have an easy time with the bankruptcy court your situation is real and actually quite common. it is not a difficult proceedure and there are lawyers all over the place who do bankruptcy work..do not pay too much though, there are lots of lawyers so shop around..you may also be able to get a legal aid society or legal clerk to do the paperwork for you..it would save you some money.. As for your daughter, I do not know anything about her specific condition, but if it is a physical disability (or an addiction to drugs of alcohol) there are federal as well as state and local programs to help her including social security. If her problems are physical of mental, there are some programs, but it depends on her. Is she legally competant? if not, she could become a ward of the state, in which case, the government will provide care/treatment or money to help/care for her. It sounds like you must love her very much, but it also sounds like you need more help for her than you can realisticly provide. seek some more help.

Thank you so much for all the suggestions. I wasn’t able to log onto this site yesterday for some reason, it drove me crazy. But anyway, you have no idea how helpful you have been. I have not had a clue about what to do and this really gives me some ideas.Â Thank you so much.

Hi JANE I was readingÂ your storyÂ about you and your daughter andÂ have some ideas that go deeper than the last letter.. Because I am disable I qualify for services which include paid for aides and councilors in my home….which I know by law they must provide them for me.. now they are not able to give me money for anyhing but they provide me withÂ several services which I could not afford. .

I even made a comment to a friend today that is why I willÂ never give up these services and will fight to keep them.

Why? because I have a gut feeling that when hyperinflation comes my staff will still have toÂ come to help me regardless of how much money the government will have to pay them..

And so their continued support isÂ priceless to me.

Now that I’ve given you this information..Â

I don’t yet know enough about your specificÂ situation with your daughter to recommend whatÂ you may do..

If you like to contact meÂ separately for my free advise please let me know and I will find a way to assist you.
Frank

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